Archive for January, 2013

Zombie Politics and Debt Hysteria

Friday, January 25th, 2013

First a quick summary.

In previous posts we’ve gone through the issues surrounding debt and built a case for economic growth and lower unemployment as viable methods to reduce our debt.  Austerity programs do not stimulate economic growth or lower unemployment, at least in the short term.  They actually make things worse.

We’ve also looked at the REAL problem which is the rate of growth in Healthcare costs.  Austerity programs do NOTHING to bring down the costs of healthcare delivery.  Economic growth also does nothing about this problem.  Yet deficit hawks are not talking about this as the middle term problem we have to solve.  Instead they focus exclusively on reducing the debt.

Why?

Zombie Politics.

This term was originally coined by John Sides.  He defines it as “ideas about politics that have become so cemented in conventional wisdom that it is virtually impossible to dislodge them. It doesn’t matter what the data says, or what published research says. Zombie politics means that even though the ideas are dead, they just can’t be killed.”

Here are a few examples of Zombie Politics in action.

The House prevented any tax increases until after the 12/31 deadline passed and even then only enough Republicans agreed so that it could pass with overwhelming Democratic support.  That’s because a core belief of current Republicans dating back to Reagan is that low tax rates for high income earners have significant economic impact.  Even though this theory has been widely discredited, most recently by the Congressional Research Service; it lives on as the cornerstone of Republican politics.

Hurricane Sandy relief was voted down because, to quote Paul Ryan, “Unfortunately [the bill] refuses to distinguish — or even prioritize — disaster relief over pork-barrel spending.”  Rep. Peter King (R-N.Y.), a powerful House Republican who represents New York’s Long Island, which sustained billions of dollars in storm damage, refuted those claims. “The House bill never contained any of those extraneous provisions,” he said.

New Jersey Gov. Chris Christie (R) said on Wednesday that the failure to vote on the aid bill was the result of “toxic internal politics” in the Republican Party. “Americans are tired of the palace intrigue and political partisanship of this Congress,” Christie said. “Disaster relief was something that you didn’t play games with.”

This isn’t the first time that Republicans have opposed disaster relief.  In each case, the same complaints about “pork barrel spending” and “unsupervised slush funds” are voiced, but those are just code words for the core issue.  They honestly don’t believe that government can play an effective role as the relief agency of last resort.  That’s because they hold fast to the zombie view that government is America’s number one problem, not its solution even in these cases of extreme need.

The first debt ceiling debate is another perfect example.  Republicans claimed that letting the president have increased spending authority is irresponsible.  Quoting FactCheck.org, “Republicans, including House Speaker John Boehner and Rep. Michele Bachmann, have said that the president wants ‘a blank check.’ Not true. First, he’s asking to borrow money to pay obligations Congress has already approved.”  Yet this characterization that increasing the debt ceiling somehow empowers Obama to spend MORE is another zombie proverb.

Another zombie maxim is that jobs are created by less government, lower taxes, and fewer regulations.  This has been boiled down recently to the frequent comment heard during the last campaign that the government doesn’t create any jobs.  Yet World War II is largely credited with the recovery from the Great Depression by the massive government spending which converted the country to a government run munitions factory.

These disproven zombie concepts have been summarized by Grover Norquist when he said, “Our goal is to shrink government to the size where we can drown it in a bathtub.”   The problem is that, contrary to Republican claims, the vast majority of American LIKE much of what modern government does.

Should Spend More

Spending About Right

Should Spend Less

Don’t Know or No Answer

Protecting the environment

59.8%

27.9%

7.7%

4.6%

Protecting the nation’s health

66.8%

25.0%

5.6%

2.6%

Halting the rising crime rate

60.9%

28.4%

9.3%

3.0%

Dealing with drug addiction

58.2%

27.9%

9.3%

4.6%

Improving the education system

69.7%

22.1%

6.3%

1.9%

Social Security

55.7%

31.9%

6.3%

6.1%

Solving urban problems

45.5%

29.8%

12.1%

12.5%

The military, arms, and defense

17.5%

46.3%

30.3%

5.9%

Highways and bridges

38.2%

47.1%

9.6%

5.1%

Welfare

16.0%

36.1%

43.3%

4.6%

Parks and recreation

34.0%

55.2%

6.1%

4.7%

Mass transit

31.7%

47.3%

9.4%

11.5%

What we are left with is a minority segment of the voting public and their representatives who are determined to REDUCE the size of government at every opportunity.  Their beliefs ARE NOT based in fact, but that doesn’t appear to bother them.

The best policies are not those that have the most likelihood to succeed.  The best policies are the ones that will ultimately reduce the size of government because this is their religion.

Don’t get me wrong.  I am a religious person.  I DO believe in God and the power of prayer.  But I don’t believe I have any right to impose my beliefs on anyone else.  When it comes to governing a country, we have to depend on good data rather than religious belief to confirm that our course is going to benefit the majority of our citizens.

In the next couple of posts let’s see if we can dig into data supporting this claim that conservative republicans possess a blind unreasoning commitment to a particular point of view, why this leads to zombie politics, and why this is something that appears UNIQUE to the conservative movement.

The REAL Financial Problem

Sunday, January 13th, 2013

As we saw in the previous post, our near term fiscal issues ARE NOT the result of irresponsible spending. They are the direct result of the deepest recession in our country’s history, surpassed only by the great depression. Part of the legislation put in place after the depression to prevent a repeat of that economic collapse included a social safety net. This safety net provides those who find themselves in dire financial condition, a floor of support below which they can’t drop. This set of interlocking programs also limits the economic damage of any contraction by keeping at least some money flowing from consumers to producers. It’s this safety net spending along with the loss in tax revenue from having excess capacity in workers and factories that is driving $600B of our annual deficits. That extraordinary safety net spending is decreasing and tax receipts are increasing as the economy recovers. The spending will disappear when we approach full employment and robust economic growth.

The REAL problem on our economic horizon is handling the cost of the baby boomer retirement and the impact that it will have on Social Security, Medicare, and Medicaid.

Moreover, an increasingly large portion of the debt is money that the government owes to itself because of borrowing from large entitlement programs such as Social Security and the Medicare. That’s because the money spent on discretionary programs has generally declined, as a share of the economy, while spending on mandatory programs has soared — and will only consume a larger share of the economy as the Baby Boom generation heads into retirement.

In fact, the debt owed to entitlement programs is now almost as large a share of the economy as all U.S. government debt before Ronald Reagan became president.

Washington Post

The Demographic Problem

The Baby Boomers are a large cohort of the population (70M+) that are going to be retiring over the next ten years. Programs like Social Security and Medicare use taxes from today’s payroll to pay the benefits for today’s retirees. If the population growth tracked GDP growth, this wouldn’t be a problem. When you have large demographic anomalies like the Baby Boom generation, you end up with a situation where there aren’t enough workers to support the costs of retirees.

Fortunately the solutions to demographic problems are comparatively simple. You either adjust benefits based on income, change the age at which people qualify for benefits, or change the tax formulas on those funding the benefits.

If you did some combination of those things, Social Security would be fine, but Medicare/Medicaid would still be in trouble.

The Healthcare Problem

Our healthcare system is also broken. The result is that the rate at which healthcare costs are growing exceeds the GDP growth rate. That is unsustainable under any circumstances.  When you combine that problem with the undeniable demographic issues of the Baby Boomer, more systematic changes are required.

Spending in General is NOT the Problem

These inexorable demographic changes mask the fact that over the past four years we have experienced historic levels of fiscal discipline. While there was a temporary and necessary spike in spending from the Recovery Act, annual appropriations actually declined by 1.4 percent a year between 2008 and 2012 in inflation-adjusted dollars — after growing by 6.1 percent a year during the George W. Bush administration.

NY Times

Real Solutions to Real Problems

Obamacare is the first step in changing the healthcare business model. Here is a short list of the next steps to change our healthcare delivery model from a transaction model to an outcomes one. These come from a report by the Commonwealth Fund. The Commonwealth Fund contracted with Actuarial Research Corporation to estimate the cumulative impact on healthcare spending by 2023 if the set of policies were to take effect in 2014. Results showed a $242 billion savings for state and local governments, $189 billion in savings for employers, and $537 billion to consumers because of lower premiums and out-of-pocket costs.

Revise the Medicare physician fee structure and methods of updating payment so that it rewards value. The sustainable growth rate formula should be repealed and replaced with a physician payment policy that incentivizes improvements in health outcomes. Such a system would only provide increases in payments to doctors participating in innovative delivery systems. Fees would otherwise remain at 2013 levels. This will force those physicians reluctant to leave the comfort of their transaction model based medicine to change.

Medicare also should be allowed to institute competitive bidding for medical commodities. The medical commodity lobby has so far prevented Medicare from applying the sort of market-based bidding that every other industry uses to drive down costs.

Strengthen primary care and support teams for high-cost, complex patients. Primary care physicians who participate in a patient-centered medical home would receive enhanced payments. The structure would provide incentives to improve patient outcomes. It will also insure that physicians continue to enter the primary care field of practice, rather than simply being employed by vertically integrated systems like Kaiser.

Bundle hospital payments to focus on total costs and patient outcomes. Providing a single payment for all care during an episode would provide incentives for teamwork and accountability to reduce readmissions and follow-ups.

Adopt payment reforms across markets with public and private payers working together. Ensuring public and private payers employ the same or similar payment methods would reduce complexity for physicians and others in the healthcare system.

 Reform medical malpractice rules and payout policies. Medical liability policies should encourage the disclosure of medical errors and provide fair compensation for injury and medical costs.

The goal is to bring the rate at which healthcare costs grow in line with GDP growth. If that can be done, then the Medicare/Medicaid problems becomes one dimensional just like Social Security and will yield to the same sorts of solutions – means tested benefits, increasing the age requirements, or changing the tax formula.

Summary

The near-term financial issues with large deficits that we face ARE NOT the result of irresponsible spending. They are the result of social safety net increases and tax receipt decreases due to high unemployment and slow financial growth. Those both can be fixed through more robust economic growth. So they are NOT systematic problems.

We DO have some systematic medium to long term problems with Social Security, Medicare, and Medicaid. Those problems are due to the demographic anomaly called the Baby Boom and our antiquated healthcare system. Social Security and Medicare need some changes to deal with the demographic issue, but that won’t fix the healthcare system. That also has to be fixed in order to preserve Medicare and Medicaid as viable programs.

Next let’s look at how some conservatives have tried to create a debt hysteria and what their motives might be.